The Nigerian Deposit Insurance Commission (NDIC) and the House of Representatives have assured Heritage Bank depositors of the protection of their funds as the NDIC has commenced the liquidation process of Heritage Bank, with verification and payment of depositors’ funds.
The Central Bank of Nigeria (CBN) revoked the bank’s licence due to its breach of Section 12 (1) of BOFIA, 2020, and appointed NDIC as the liquidator.
Heritage Bank’s Licence Revocation and NDIC’s Role
The CBN, in a statement signed by the Acting Director of Corporate Communication, Sidi Ali, announced the revocation of Heritage Bank’s license due to persistent financial instability. The bank’s inability to improve its financial performance led to this drastic measure.
The statement read, “This action has become necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020. The board and management of the bank have not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability.”
The NDIC, now the appointed liquidator, has taken immediate steps to protect depositors. Bashir Nuhu, the Director of Communication & Public Affairs at NDIC, stated that depositors with valid claims will receive up to N5 million. This payment will be facilitated using the Bank Verification Number (BVN) to locate alternate accounts within the banking industry.
The Payment Process and Assurance to Depositors
To ensure a smooth liquidation process, the NDIC has outlined a clear procedure for depositors.
Those with alternate accounts in other banks will receive payments directly. For depositors without alternate accounts, the NDIC has provided instructions to visit the nearest branch of the defunct bank with proof of account ownership, a verifiable means of identification, and their BVN for verification and subsequent payment.
“Verification and payment of depositors without alternate bank accounts will be done at the nearest branch of the bank. Depositors need to provide proof of account ownership and verifiable means of identification such as a driver’s licence, permanent voter’s card, or National Identity Card, together with their alternate account and BVN for verification and payment of insured sums,” part of the NDIC statement read.
The NDIC has also assured creditors of the failed bank that they can file their claims either in person or via an online platform. Creditors will be paid after depositors, and the NDIC has urged debtors who have not completed their loan repayments to do so promptly.
Broader Implications and Reactions
The Bank Customers Association of Nigeria has expressed support for the CBN’s decision. In an exclusive interview with The PUNCH, the association’s president, Dr Uju Ogubunka, emphasised that the decision was made to protect the overall banking sector.
“The CBN cannot just take action without considering the implications. If a bank has been run aground, it has implications for others. If you put all of these together, that institution can jeopardise the system as a whole if the authorities do not take the necessary actions,” Ogubunka said.
He highlighted that the CBN would have considered various options, including potential mergers or acquisitions, but the bank’s irredeemable state left no alternative.
He noted the inconvenience this situation might cause for customers but stressed that the NDIC’s intervention aims to minimise disruption and ensure that those with credits in their accounts are compensated appropriately.
Expert Opinions and Legislative Oversight
Financial experts have largely supported the CBN’s move.
Professor Uche Uwaleke, a renowned professor of capital markets, described the revocation of Heritage Bank’s licence as a proactive step to maintain financial stability.
“This proactive step by the CBN is in the overall interest of financial system stability. With the NDIC taking over the liquidation process, efforts should be made to protect the depositors as well as the interests of employees using liquidation dividends,” he stated.
Adding a layer of legislative oversight, the House of Representatives has pledged its commitment to ensuring the safety of depositors’ funds.
In a statement by its spokesman, Akin Rotimi, the House expressed awareness of the situation and assured the public of its dedication to a transparent and orderly resolution process.
“We assure the public, particularly depositors and stakeholders of Heritage Bank, that the House is committed to carrying out its constitutional oversight functions to ensure that this development does not negatively impact Nigerians,” the statement read.
Commitment to Transparency and Public Confidence
The House of Representatives emphasised the need for clear communication channels between the CBN, NDIC, and the public. This transparency is crucial to maintaining trust in the financial system during the liquidation process.
Mohammed El-Rufai, Chairman of the House Committee on Banking Regulations, stated, “The committee will closely monitor the liquidation process to ensure that the rights of depositors are protected and that the process adheres to the highest standards of transparency and accountability.”
Also read: Heritage Bank: NDIC steps in as liquidator, to establish bridge bank
Ahmed Jaha, Chairman of the Committee on Insurance and Actuarial Matters, reinforced this commitment, stressing the importance of the NDIC’s mandate in protecting depositors’ funds.
“We will work diligently to oversee that the NDIC executes its mandate effectively, ensuring the protection of depositors’ funds and maintaining confidence in the financial sector,” he said.
The liquidation of Heritage Bank marks a significant moment in Nigeria’s financial sector, reflecting the CBN’s commitment to maintaining stability and protecting depositors. The NDIC’s prompt action and the legislative oversight provided by the House of Representatives aim to ensure a transparent and orderly resolution process.
While this development brings some inconvenience to customers, the coordinated efforts of the CBN, NDIC, and other stakeholders provide assurance that depositors’ funds are safeguarded and the financial system remains robust. The ongoing communication and oversight are vital to preserving public confidence in Nigeria’s banking sector during this transitional period.
